The fear that television stations might close in the face of fierce competition was the main reason for the Executive Council's decision to issue just two new free-to-air TV licences.

A person familiar with the council's discussions said the decision to offer licences to PCCW's Hong Kong Television Entertainment and i-Cable's Fantastic TV but not Hong Kong Television Network (HKTV) was based on the "mainstream views" of Exco members, although it was not unanimous and was not put to a vote.

The mainstream view was that cutthroat competition would force the closure of TV stations, the person said, citing the 1978 collapse of Commercial Television.

A government source, meanwhile, said the chief secretary, financial secretary and secretary for justice agreed that only two licences should be issued, adding that the decision was not intended to protect any existing players.

Chief Executive Leung Chun-ying said the whole market's sustainability was a concern.

Watch: CY Leung on free-to-air ruling before Legco

This emerged as HKTV chairman Ricky Wong Wai-kay confirmed that a judicial review challenging the decision would be filed "very soon".

Wong has said he was invited by a senior government official in 2009 to bid for a licence and the government still had not explained why he lost.

Lawyers said the judicial review could hold up the licensing process, as Wong stood a chance of winning.

It is understood that of the applicants, HKTV was not seen as the weakest in reports commissioned by the then Broadcasting Authority (now the Communications Authority), which have not been fully made public.

The reports by Spectrum Value partners - partly quoted in TVB's filings for its unsuccessful judicial review application aimed at blocking the new licences - predicted that ATV would be the first to go out of business if three new players were brought in.

But the reports said "sustainability of the market or individual applicants should not be a primary consideration" in the granting of new licences.

The government also said in 1998 that it would not cap the number of licences.

Nevertheless, the person familiar with Exco discussions said: "Exco does care about the impact on market order. Unlike the telecommunications market, the free-TV market affects seven million people and the grass-roots people who can't afford pay-TV don't have choices other than free TV."

Exco had chosen what it regarded as the two strongest operators.

As the three contenders had no financial problems, "the most crucial factor members took into account was programme planning. [Winners] HK Television Entertainment and Fantastic Television are better than Hong Kong Television Network", the person said.

It was "political nonsense" to say that Exco should not deviate from the Broadcasting Authority's recommendation in 2011 that all three licences be granted. "Exco needs to take into account all factors before making a decision."

Wong said Hong Kong people had many choices of current affairs programmes, but not of entertainment on free TV.

"We invested HK$900 million mostly on entertainment shows," he said.

Wong rejected the suggestion his company, which planned to offer 30 free channels, two produced by itself, was the weakest in programme planning.

"From programming quality to experience, we are the best," he said.

Executive councillors Fanny Law Fan Chiu-fun and Regina Ip Lau Suk-yee said yesterday that the government should explain more clearly the rationale behind the decision to settle the controversy.

Fan noted many people were not convinced by the government's explanation.

Democrat James To Kun-sun said that he would seek a debate in the Legislative Council on the issue on November 6.